Illustration: Chen Xia/GT

Amid the rapid evolution in the global digital landscape and its associated industrial and supply chains, South Korea, an export-oriented economy, is increasingly supporting SMEs to drive growth, create jobs, and foster innovation. The country has stepped up efforts to activate the vitality of SMEs, integrating competitive industries, reforming institutions, supporting growth, and cultivating leading enterprises.

The South Korean government's strong support for the development of SMEs will not only serve as a supplement to large enterprises, but it will also play a positive role to balance the country's economic structure. In order to transform SMEs into a new growth engine in South Korea, the authorities there urgently needs to address the bottlenecks the country faces in technology innovation and development.

First, there is a large number of SMEs in the country, but their profits have been relatively low. Statistics from the past two years show that there are over 8 million various types of enterprises in South Korea, with the SMEs accounting for 99.9 percent, while large enterprises make up only 0.1 percent.

However, the sales revenues of the top 30 large corporate groups, such as Samsung, SK, Hyundai, and LG, account for nearly 80 percent of South Korea's GDP, far exceeding the contributions of SMEs. This highlights the risk of an unbalanced economy in South Korea.

Second, many SMEs are overly dependent on large enterprises and lack ability to develop independently. 

The top 10 largest enterprises in South Korea account for 80 percent of the country's total industrial output and more than half of the stock market value. The situation largely disadvantages lower- and middle-tier SMEs that provide components and other support to large corporations. Therefore, nurturing more SMEs that can operate independently from domestic titans and possess considerable competitiveness has become an urgent issue that successive South Korean governments hope to address.

Third, lack of competitiveness restricts the SMEs' international expansion. In recent years, against the backdrop of intensified geopolitical competition leading to increased uncertainty in the international market, South Korea's export-oriented economy has revealed shortcomings in supply of key raw materials and important equipment. Positioned at the bottom of the world's industrial chains, and with limited industrial competitiveness, insufficient digital capabilities, and a relatively weak degree of internationalization, the numerous SMEs are providing support for South Korea's economic growth that is noticeably below expectations.

To address the challenges, the South Korean government has accelerated efforts to support SME development, introducing various policies. 

From the perspective of past practices, South Korea faces challenges in fostering the growth of SMEs and balance national economic structure. These strategies offer valuable lessons for other countries that hope to tap into the development potential of SMEs.

First, SMEs can serve as a critical buffer for maintaining economic stability. Although it is not easy to cultivate more SMEs that are independent of the large enterprises, with the efforts of the South Korean government, the contribution of SMEs to the country's yearly GDP has increased. This is expected to further benefit the SMEs, which can stabilize the economy and address employment challenges.

Second, SMEs can act as drivers of innovation. In the process of providing supporting services to large enterprises, some SMEs have gradually developed their own leading technologies, innovative patents, and overseas cooperation models. Additionally, by growing together with large enterprises and gaining a certain share of the global market, their role in fostering innovation is increasingly evident, playing a positive role in bridging the gaps in industry and innovation in South Korea.

Third, SMEs can always serve as a vital engine for employment. Data shows that SMEs in South Korea currently provide over 80 percent of the country's jobs. This indicates that, spurred by the government's supportive policies, the SMEs have solidified their role as a key contributor to South Korea's job market.

The author is research fellow at the Institute of Northeast Asian Studies at Heilongjiang Provincial Academy of Social Sciences. bizopinion@globaltimes.com.cn